We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Everest Re vs. XL Group: Which Stock Is the Stronger Bet?
Read MoreHide Full Article
The economic backdrop instills hopes with many reasons to cheer for. While the Federal Reserve has raised the interest rate in the last concluded FOMC meeting, an impetus from the Trump’s tax reform policy raises optimism.
The Fed also provided an optimistic unemployment outlook. The Fed officials expect the employment rate at 4.1% for 2017 and a decline of 20 bps to 3.9% in 2018 and 2019, respectively. GDP is estimated to grow at 2.5% in both 2017 and 2018, reflecting an increase from 2.4% for 2017 and 2.1% for 2018, projected earlier.
The insurance industry is a major beneficiary of an improving rate environment. While the Fed raised rates thrice this year, the outgoing Fed chairperson Janet Yellen reiterated the expectation to raise rates thrice in 2018 and twice in 2019, respectively.
A progressing rate environment drives better investment results. Improving investment income, an important component of a property and casualty insurer’s top line, should benefit the same.
Though this year bore the brunt of catastrophes events, the only silver line is that insurers now brace up to increase price that remained flat over some time due to a not-so-active catastrophe environment.
The Property and Casualty Insurance industry is currently ranked at #184 (lies at the bottom 31% of the Zacks Industry Rank for 265 plus industries) and has also slightly underperformed the S&P 500 in a year with a rally of 16.2%. The index on the other hand climbed 18.6%.
Here we focus on two property and casualty insurers: Everest Re Group Ltd. writes property and casualty, reinsurance and insurance in the United States, Bermuda and international markets, while XL Group Ltd is a leading global provider of insurance, reinsurance and financial risk solutions for enterprises and insurance companies. While Everest Re has a market capitalization of $9.1 billion, XL Group has $9.3 billion of the same.
It will be interesting to note which stock is better positioned in terms of fundamentals.
Both Everest Re and XL Group have underperformed the industry with shares of the former having gained 1.7% and the latter losing 2.2% year to date. Here, Everest Re emerges a clear winner.
Valuation
The price to book value metric is the best multiple used for valuing insurers. Compared with Property and Casualty Industry’s P/B ratio of 1.59, both XL Group and Everest Re are underpriced with a reading of 0.81 and 1.14, respectively. Thus, this round evidently goes to XL Group as the company’s shares are cheaper than those of Everest Re.
Debt-to-Equity
Both XL Group and Everest Re have lower debt-to-equity compared with the industry average of 32.29. Everest Re with a leverage ratio of 7.95 has an edge over XL Group with the same of 27.85. This round goes to Everest Re.
Return on Equity
Both the companies have underperformed the industry. Everest Re’s return on equity of 2.22% underperformed the industry average of 5.39%. XL Group’s return on equity is -4.03%. Everest Re thus again wins this round.
Dividend Yield
Everest Re’s dividend yield was 2.34% in a year while XL Group’s was 2.43%. Both have a dividend yield that outshines the industry’s average of 0.45%. Comparatively, XL Group has an edge over Everest Re this time.
Earnings Estimate Revisions and Growth Projections
XL Group’s 2017 estimates have slid to a further loss of $1.98 per share from a loss of $1.00 over the last 60 days and declined 2.7% for 2017. On the other hand, Everest Re’s 2017 estimates have moved down 1.2% but increased 0.4% for 2018 over the same time frame.
For XL Group, The Zacks Consensus Estimate for earnings per share for 2017 reflects a year-over-year plunge of 221.5% but a surge of 283.8% for 2018. The stock has long-term expected earnings per share growth of 9%.
For Everest Re, The Zacks Consensus Estimate for earnings per share is $1.71 for 2017, reflecting a year-over-year slump of 92.8%. For 2018, the Zacks Consensus Estimate for earnings is pegged at $19.80, representing a year-over-year surge of 1056.4%. The stock has long-term expected earnings per share growth of 10.0%.
Therefore this round goes equally to both the companies.
Zacks Rank
Everest Re has a Zacks Rank #3 (Hold) with an edge over XL Group that has a Zacks Rank of 5 (Strong Sell).
Earnings Surprise History
Per the companies’ surprise history, XL Group has surpassed the Zacks Consensus Estimate in three of the last four quarters with an average beat of 13.00%. Everest Re also delivered positive surprises in three of the last four quarters with a four-quarter average beat of 34.90%.
Here, Everest Re has an edge over XL Group.
To Conclude
Everest Re is a better pick than XL Group on the back of Zacks Rank, price performance, leverage, return on equity and the earnings surprise history. Considering parameters like valuation and dividend yield, XL Group seems better poised than Everest Re. However, based on our comparative analysis, Everest Re presently has an advantage over XL Group.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Image: Bigstock
Everest Re vs. XL Group: Which Stock Is the Stronger Bet?
The economic backdrop instills hopes with many reasons to cheer for. While the Federal Reserve has raised the interest rate in the last concluded FOMC meeting, an impetus from the Trump’s tax reform policy raises optimism.
The Fed also provided an optimistic unemployment outlook. The Fed officials expect the employment rate at 4.1% for 2017 and a decline of 20 bps to 3.9% in 2018 and 2019, respectively. GDP is estimated to grow at 2.5% in both 2017 and 2018, reflecting an increase from 2.4% for 2017 and 2.1% for 2018, projected earlier.
The insurance industry is a major beneficiary of an improving rate environment. While the Fed raised rates thrice this year, the outgoing Fed chairperson Janet Yellen reiterated the expectation to raise rates thrice in 2018 and twice in 2019, respectively.
A progressing rate environment drives better investment results. Improving investment income, an important component of a property and casualty insurer’s top line, should benefit the same.
Though this year bore the brunt of catastrophes events, the only silver line is that insurers now brace up to increase price that remained flat over some time due to a not-so-active catastrophe environment.
The Property and Casualty Insurance industry is currently ranked at #184 (lies at the bottom 31% of the Zacks Industry Rank for 265 plus industries) and has also slightly underperformed the S&P 500 in a year with a rally of 16.2%. The index on the other hand climbed 18.6%.
Here we focus on two property and casualty insurers: Everest Re Group Ltd. writes property and casualty, reinsurance and insurance in the United States, Bermuda and international markets, while XL Group Ltd is a leading global provider of insurance, reinsurance and financial risk solutions for enterprises and insurance companies. While Everest Re has a market capitalization of $9.1 billion, XL Group has $9.3 billion of the same.
It will be interesting to note which stock is better positioned in terms of fundamentals.
Two better-ranked stocks from the same industry are Alleghany Corporation and CNA Financial Corp. (CNA - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Price Performance
Both Everest Re and XL Group have underperformed the industry with shares of the former having gained 1.7% and the latter losing 2.2% year to date. Here, Everest Re emerges a clear winner.
Valuation
The price to book value metric is the best multiple used for valuing insurers. Compared with Property and Casualty Industry’s P/B ratio of 1.59, both XL Group and Everest Re are underpriced with a reading of 0.81 and 1.14, respectively. Thus, this round evidently goes to XL Group as the company’s shares are cheaper than those of Everest Re.
Debt-to-Equity
Both XL Group and Everest Re have lower debt-to-equity compared with the industry average of 32.29. Everest Re with a leverage ratio of 7.95 has an edge over XL Group with the same of 27.85. This round goes to Everest Re.
Return on Equity
Both the companies have underperformed the industry. Everest Re’s return on equity of 2.22% underperformed the industry average of 5.39%. XL Group’s return on equity is -4.03%. Everest Re thus again wins this round.
Dividend Yield
Everest Re’s dividend yield was 2.34% in a year while XL Group’s was 2.43%. Both have a dividend yield that outshines the industry’s average of 0.45%. Comparatively, XL Group has an edge over Everest Re this time.
Earnings Estimate Revisions and Growth Projections
XL Group’s 2017 estimates have slid to a further loss of $1.98 per share from a loss of $1.00 over the last 60 days and declined 2.7% for 2017. On the other hand, Everest Re’s 2017 estimates have moved down 1.2% but increased 0.4% for 2018 over the same time frame.
For XL Group, The Zacks Consensus Estimate for earnings per share for 2017 reflects a year-over-year plunge of 221.5% but a surge of 283.8% for 2018. The stock has long-term expected earnings per share growth of 9%.
For Everest Re, The Zacks Consensus Estimate for earnings per share is $1.71 for 2017, reflecting a year-over-year slump of 92.8%. For 2018, the Zacks Consensus Estimate for earnings is pegged at $19.80, representing a year-over-year surge of 1056.4%. The stock has long-term expected earnings per share growth of 10.0%.
Therefore this round goes equally to both the companies.
Zacks Rank
Everest Re has a Zacks Rank #3 (Hold) with an edge over XL Group that has a Zacks Rank of 5 (Strong Sell).
Earnings Surprise History
Per the companies’ surprise history, XL Group has surpassed the Zacks Consensus Estimate in three of the last four quarters with an average beat of 13.00%. Everest Re also delivered positive surprises in three of the last four quarters with a four-quarter average beat of 34.90%.
Here, Everest Re has an edge over XL Group.
To Conclude
Everest Re is a better pick than XL Group on the back of Zacks Rank, price performance, leverage, return on equity and the earnings surprise history. Considering parameters like valuation and dividend yield, XL Group seems better poised than Everest Re. However, based on our comparative analysis, Everest Re presently has an advantage over XL Group.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>